Two leading Chinese carriers, China Eastern Airlines and China Southern Airlines, have announced they will get RMB3 billion ($441.2 million) state bail-out respectively.
CEA said in a statement filed with the Shanghai Stock Exchange that it will issue 652.18 million A shares to the government and its major shareholders at RMB3.6 per share, and the same amount of H shares on the Hong Kong stock market at RMB1 per share. Proceeds will be used to replenish capital flow.
China Southern Airlines announced in a separate statement a plan to raise RMB3 billion through share issues in Shanghai and Hong Kong. It will issue 721.15 million A shares at RMB3.16 per share and the same amount of H shares at RMB1.
China’s airlines have seen passenger traffic rise by double-digit rates for 20 years, but major carriers are under many pressures this year.
Natural disasters such as last winter’s prolonged snowstorms and the May earthquake in southwest China hit tourism and air travel. In recent months, the global financial crisis and economic slowdown have curbed business travel.
Liu Gongshi, senior expert in civil aviation industry, said aviation transportation has irreplaceable importance in the country’s economic development.
Chinese state-owned airlines, in particular, have made contributions in carrying out state missions and disaster relief works. Liu Gongshi said state capital injection is necessary when these major airlines suffer from climbing assets liability ratio.
The share issue plan still needs approval from shareholders and regulators. It is expected to be completed in 2009.
Source: China View